Posts from the Kentucky Category
Bourbon County, KY – Wet, Dry, or Moist?
February 11th, 2007
We’re getting word that Kentucky will soon make public the requirements for out-of-state wineries to get a small farm winery license for shipping wine directly to consumers. Regardless of the difficulty of the process that Kentucky unveils, wineries will surely face a challenge in keeping track of the 53 dry and 16 “moist” counties in Kentucky. A moist county is a dry county with the exception of one or more wet cities within its borders.
Click here to see a list of the dry counties and here for the colored map.
Just in case you were wondering, Bourbon County, KY is one of the 30 wet counties.
News from Kentucky
February 7th, 2007
The headline said, “State drops out of wine suit: Small operators can ship directly,” but the reported change in direct shipment rights occurred in December of last year. What’s new is that the state has abandoned its appeal, leaving the wholesaler trade association to continue alone in attempting to persuade the Court of Appeals to reverse the pro-commerce part of the Huber/Cherry Hill ruling. (The ruling is not entirely favorable; see the current revision of Wine Distribution Notes for details.) The practical effect is that whatever chance the wholesalers may have had to get a stay from the Court of Appeals, to render the lower court decision ineffective during the appeal, is vastly reduced by the acquiescence of the state in the December judgment.
“New Vintage” of Wine Litigation
February 5th, 2007
There’s an excellent article on law.com titled “New Vintage of Wine Litigation is Fermenting”. The article summarizes the “next wave” of wine lawsuits that will continue to shake up the landscape of direct shipping.
New suits and amended complaints filed in the past year are attacking requirements that consumers must purchase wine in person, with the first court decisions recently issued in Maine and Kentucky. Wineries also are challenging legal shipping limits that are based on production volume.
In both types of cases, out-of-state wineries accuse the states of discriminating against them.
It’s interesting that almost two years after the Granholm decision there are over 30 lawsuits in over 20 states, and almost all of them are trying to clarify what the ruling actually meant. Richard van Duzer predicts,
Ultimately, this will be back before the Supreme Court, which will have to be more explicit about what it said and what it hasn’t said.
Ken Starr also contributes a quote to describe the de facto discrimination,
It appears that the wholesalers are simply seeking legislatively to do indirectly what the Supreme Court said in Granholm they can’t do directly.
Below is a summary of the litigation discussed.
Maine: In Cherry Hill Vineyard v. John E. Baldacci, No. 1:05-cv-00153 (D. Maine), the judge upheld the in-person requirement in Maine’s law , claiming the face-to-face restriction applies equally to in-state and out-of-state wineries.
Kentucky: In Cherry Hill Vineyards v. Hudgins, No. 3:05-cv-00289 (W.D. Ky.), on December 26th, 2006, the judge struck down the in-person requirement, but did not strike down the 50,000 gallon capacity cap restriction.
Indiana: In Baude v. Heath, No. 1:05-cv-00735 (S.D. Ind.), IN residents are suing over the requirement that the initial purchase of wine be made in person.
Massachusetts: In Family Winemakers of California v. Jenkins, No. 1:06-cv-11682 (D. Mass.), the Family Winemakers of California is suing over the 30,000 gallon capacity cap, which is conveniently just over the production of the largest producer in MA.
Arizona: In Black Star Farms v. Morrison, No. 2:05-cv-2620 (D. Ariz.), five AZ consumers are suing over the 20,000 gallon capacity cap.
"New Vintage" of Wine Litigation
February 5th, 2007
There’s an excellent article on law.com titled “New Vintage of Wine Litigation is Fermenting”. The article summarizes the “next wave” of wine lawsuits that will continue to shake up the landscape of direct shipping.
New suits and amended complaints filed in the past year are attacking requirements that consumers must purchase wine in person, with the first court decisions recently issued in Maine and Kentucky. Wineries also are challenging legal shipping limits that are based on production volume.
In both types of cases, out-of-state wineries accuse the states of discriminating against them.
It’s interesting that almost two years after the Granholm decision there are over 30 lawsuits in over 20 states, and almost all of them are trying to clarify what the ruling actually meant. Richard van Duzer predicts,
Ultimately, this will be back before the Supreme Court, which will have to be more explicit about what it said and what it hasn’t said.
Ken Starr also contributes a quote to describe the de facto discrimination,
It appears that the wholesalers are simply seeking legislatively to do indirectly what the Supreme Court said in Granholm they can’t do directly.
Below is a summary of the litigation discussed.
Maine: In Cherry Hill Vineyard v. John E. Baldacci, No. 1:05-cv-00153 (D. Maine), the judge upheld the in-person requirement in Maine’s law , claiming the face-to-face restriction applies equally to in-state and out-of-state wineries.
Kentucky: In Cherry Hill Vineyards v. Hudgins, No. 3:05-cv-00289 (W.D. Ky.), on December 26th, 2006, the judge struck down the in-person requirement, but did not strike down the 50,000 gallon capacity cap restriction.
Indiana: In Baude v. Heath, No. 1:05-cv-00735 (S.D. Ind.), IN residents are suing over the requirement that the initial purchase of wine be made in person.
Massachusetts: In Family Winemakers of California v. Jenkins, No. 1:06-cv-11682 (D. Mass.), the Family Winemakers of California is suing over the 30,000 gallon capacity cap, which is conveniently just over the production of the largest producer in MA.
Arizona: In Black Star Farms v. Morrison, No. 2:05-cv-2620 (D. Ariz.), five AZ consumers are suing over the 20,000 gallon capacity cap.
Results from Federal District Court in Kentucky
December 27th, 2006
It was pretty good, though it could have been better.
Yesterday, Judge Charles R. Simpson III reaffirmed his analysis of last August in the Cherry Hill case, finding that on-site only requirements in the direct shipment law effective on January 1 are unenforceable because they unduly burden interstate commerce relative to in-state direct shipments. The ruling, which has direct effect only in Kentucky, deprives anti-commerce elements of a frequently employed rear guard tactic against Granholm –the introduction of illusory equality by requiring both in-state and out-of-state wineries to sell only from orders placed by the buyer in person at the winery site.
Other aspects of the new law remain in place, including the right of out-of-state wineries to hold “small farm winery” licenses. The winery and consumer plaintiffs had also challenged two restrictions on small farm winery licensees, (1) that the license is available only to wineries producing no more than 50,000 gallons annually [~21,000 cases], and (2) that wineries may ship no more than two cases in a single order. While there is no doubt that many out-of-state wineries and no Kentucky wineries are affected by the volume cap, or that small order requirements are more onerous for longer distance deliveries, the court decided both restrictions were constitutionally permissible because the inequities arose from “mere geographic happenstance.” Where one draws the line between geographic happenstance and an impermissibly protectionist system remains to be decided another day. (The same opinion also upholds a peculiar part of the new law that creates state funding for zero-markup distribution of small farm wines by distributors, if any, who choose to participate, on the grounds that it will be available to all farm wineries, wherever located.)
The pro-commerce part of the opinion rests on the court’s finding “that each winery’s products are distinctive,” a principle of potentially far-reaching significance. If wholesalers and their governmental allies cannot impose on-site requirements, they are left with either accepting direct shipment or achieving the politically challenging objective of cutting it off for their own state’s wineries. As Judge Simpson put it,
“The principal problem faced by the defendants herein is that the legislature chose to permit direct shipment of alcohol. The choice to do so has thus taken us down the current road.”
Where the current road leads will be the subject of appeals in the 6th Circuit. The state’s and wholesalers’ appeal from the August ruling has been parked in the Court of Appeals, pending today’s judgment. Their appeal from both will doubtless now go forward. At this point, it is unknown whether the plaintiffs will cross-appeal on the volume cap and maximum order quantity issues.
Update: An unanswered practical question is how the two-case limit will be applied in the absence of an on-site requirement. Unless the Court of Appeals stays it, the December 26th order simply snips the in-person ordering requirement out of the statute. It makes no change in the two parts of the statute that provide, “The amount of wine shipped is limited to two (2) cases per customer per visit.” Even if the state must substitute “order” for “visit” in practice, the opinion seems to leave room for banning cost-saving measures like consolidating orders for shipment.
